Texas Real Estate Business

OCT 2017

Texas Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in Texas.

Issue link: http://texasrealestatebusiness.epubxp.com/i/885420

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Page 36 of 58

34 • October 2017 • Texas Real Estate Business www.REBusinessOnline.com M A R K E T H I G H L I G H T: F O R T W O R T H Given its diversity of employment sectors, relatively low cost of living and vast amount of land available for development, the Dallas-Fort Worth (DFW) metroplex has become a hot- bed for corporate relocations. It's no wonder. Job growth through- out the metro is off the charts and the expectation is that about 3.6 million more residents will move in by 2030. The Fort Worth multifamily market in particular is on a remarkable run. The sector has experienced 10 straight quarters with an occupancy rate of 95 percent or higher. In addition, rent growth is at all-time high of 6.6 per- cent, as of the second quarter of 2017. The evidence of strong fundamen- tals throughout DFW has never been stronger or more convincing for mul- tifamily investors, even for those new- to-market skeptics. Historically, the performance of the DFW multifamily market has gener- ally mirrored that of most other Texas markets. Now, however, the city's ex- ceptional job and population growth have given it the edge. On the lending front, terms for agency financing for existing multi- family product remain attractive, and banks are still providing debt for de- velopment. That said, the market isn't neces- sarily following some national trends. Rent appreciation remains strong with only mild cap rate compression. Class B and C product are also demonstrat- ing significant rent growth. And while the volume of new con- struction in DFW steadily outpaces that of other metros, the market still may not be able to supply enough apartment units to keep up with ei- ther the current population forecast or the future demand cycle. There are approximately 5,000 units set to be delivered across Fort Worth over the next 12 months, compared to approximately 29,000 across the way in Dallas. The market relies on a num- ber of extremely active developers — JPI, Trammell Crow Co., Davis De- velopment, Carlton Residential and Streetlights Residential — for the bulk of its new deliveries. On the investment side, private/ family office-type buyer groups rep- resent the chief source of demand for multifamily product. However, larger investment firms like Cortland Part- ners, Blackstone and Starwood are also eyeing Fort Worth more than they have in years past. Our research suggests that the market is experiencing an uptick in demand from buyers operating in California, chiefly private, high-net- worth investors. International sources of capital are also committing to Fort Worth, with interest among foreign investment groups primarily stem- ming from firms in Asia, Canada and the Middle East. Value-Add Advantages As the gap between rental rates for newly constructed and well-located Class B properties widens, investors are taking advantage by updating the interiors, kitchens and bathrooms of units. In some cases, these upgrades are translating into rent premiums of $100 to $200. Roughly half of ARA Newmark's year-to-date closings throughout the metroplex have involved value-add assets. Recent trades for multifamily communities such as Villas at LeBlanc Park, Cumberland at Ridglea and Cot- tages of Bedford — all of which are lo- cated within or on the outskirts of Fort Worth — exemplify how quickly new investors have overcome any initial hesitation to buy in this market. Heading into 2018, we expect that the market's healthy fundamentals will persist, that developers will con- tinue to turn product and that transac- tion velocity will remain strong. Though demand for product in core urban areas may cool when the construction cycle slows, submarkets such as Southwest Fort Worth, Alli- ance, Las Colinas and Desoto should continue to take the popular vote, much like Plano, Frisco and McKin- ney on the Dallas side. Expect big wins from newer hotspots such as West Dallas, West 7th and Chisholm Trail as well. In summation, so long as the sup- ply can meet the formidable future demand, we believe the multifamily market will thrive. 29201 Quinn Rd., Ste. B • - • Tomball, TX 77375 ( 281 ) 401-4086 • - • tomballtxedc.org primed & focused : primed & focused : • STRATEGIC LOCATION • DEVELOPMENT READY SITES • SKILLED WORKFORCE • RELOCATION & EXPANSION INCENTIVES • STRATEGIC LOCATION • DEVELOPMENT READY SITES • SKILLED WORKFORCE • RELOCATION & EXPANSION INCENTIVES tomball, tx tomball, tx focus : fo c us : t o m b all , tx fo c us : Brian O'Boyle Sr. Vice Chairman, CCIM ARA Newmark STRONG FUNDAMENTALS CONTINUE TO FUEL FORT WORTH MULTIFAMILY MARKET Brian Murphy Executive Managing Director, CCIM ARA Newmark

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